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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: SouthFloridaGuy who wrote (89145)	10/25/2008 3:32:49 PM
From: Elroy Jetson	2 Recommendations Read Replies (2) \| Respond to of 116555

Foreigners are already dumping corporate bonds and stocks if you dissect the the capital account figures - as you point out in your private note to me. This is why our interest rates will rise, and the p/e ratios on stocks will decline. This means the U.S. Dollar will get a lot of respect. It will earn higher interest rates and buy stocks, bonds and real estate at a good price relative to income. U.S. Dollars will buy even more gold or copper. The Fed is already below 2.25%. They can lower to 0.0%. Still, long-dated interest rates will continue to rise. A 30 year fixed jumbo mortgage is 9.8%. This is great news for savers! wellsfargo.com Foreigners have rotated into U.S. Treasuries, but they may withdraw from those as well. Then conforming fixed rate mortgage will rise as well. At that point the Fed may well lose control of short-term rates as well, and they too will rise dramtically. This is indeed a very good time to own U.S. Dollars, and a terrible time to owe U.S. Dollars. But what about our trade deficit? This will not be fixed by an ultra-low Dollar, as Bush's incompetent policy has shown. Higher interest rates means a higher currency value. If you eliminate spending in Iraq and Afghanistan, our balance of trade suddenly looks far better. Stop playing world policeman and our poor balance of trade is now a surplus! .